Same day delivery — what can we learn from Wal-Mart de México?

Has Wal-Mart figured out how to do same day delivery? The Wall Street Journal seems to think so — at least within their Mexican operations (Mexico Delivers for Wal-Mart, Feb 20).

Has Wal-Mart really figured this all out? I have my doubts.

There are a couple of things that Wal-Mart has going for it in Mexico that are likely not really portable to the US and may indeed point to limits on how much they can actually grow this business in Mexico.

Superama began home delivery in 1993—its motto is “Superama spoils you”—with managers taking orders for items like large bottled-water jugs by phone or fax. The firm created a call center to handle growing volume, followed by a Web page and a mobile application. Now, about a fifth of its grocery orders arrive via mobile-phone apps, computers and tablets.

The service is strongest in metropolitan Mexico City, where much of Mexico’s wealth is concentrated. The capital’s snarled traffic and cramped grocery stores make delivery from Superama appealing for the well-to-do. A growing number of dual-income families also opt for delivery to make better use of their limited free time. …

Part of what makes the service successful in Mexico is the vast wage gap between wealthier customers and low-paid workers: A typical Superama-ordering household earns at least four times more than the store employee assembling each order, according to company officials.

So their Mexican success is predicated on having a dense population of wealthy (relative to those doing the work) customers. This is akin to saying that nice grocery stores in Manhattan have been offering delivery for years and hence any store anywhere in the States should be able to do the same. However, there are differences between the borough of Manhattan and, say, Manhattan, Kansas. Once you give up on having a lot of affluent population customers in a small area, this is going to be a lot harder to do. For example, Wal-Mart is currently testing grocery delivery in Denver. According to Wikipedia, the population density of Denver is 4,044/sq mi. In contrast, Manhattan clocks in at 70,517.9/sq mi, so Denver would require a lot more driving for each order delivered.

Now to be fair, the density of Mexico City (15,000/sq mi) is closer to Denver than Manhattan — but that is looking at the overall population and not at the upper and middle class areas that a delivery service would target. Nicer neighborhoods in Mexico could be fairly compact. It may be the case that those able and willing to spend for home delivery in Denver are more densely located than the city overall. I am doubtful that this is the case. In my experience, it is pretty easy to identify the nicer residential areas of Denver just as one would identify the nicer areas of any US city — just look for where the Whole Foods are. In Denver that puts you in neighborhoods that are more suburban sprawl than Upper East Side dense.

That also points to another issue. In Mexico or other developing markets, Wal-Mart can position itself as high-end. That is a much tougher sell in the US where Whole Foods or regional chains such as Wegmans have already claimed that high ground.